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In an announcement this week, Steve Ballmer outlined major developments for his company’s next edition of Microsoft Office software, known as Office 2013.

The July 16 announcement in San Francisco was one of a series of important developments in Microsoft’s business strategy this year, coming after Microsoft unveiled the new Windows 8 operating system in February and its plan to produce a tablet earlier this summer.

Geekwire’s Todd Bishop and John Cook described the ways Office will be changing and the challenges it faces in the market.

The first major change representatives announced was that software developers are adapting the Windows 8 operating system and Office 2013 to tablets and cloud computing.

In addition, Microsoft will offer the software as a subscription service to download wirelessly, called Office 365. This is the version that will be compatible to cloud users.

“They’re really straddling this interesting line where they’re really trying to adapt Microsoft Office for online services, and yet still make it valuable to actually have the program running on your local hard drive versus of someone else’s cloud out in the data center and coming over the internet,” says Todd.

Office 365 will compete more closely with the Google Documents, which offers free documents, spreadsheets, and storage in the cloud. In this respect, it will encounter difficulties because it is competing with a free service.

“Rather than hosting the actual program up in the cloud, they’re integrating file storage from the cloud down into these programs, and they’re trying to make it seamless,” says Todd.

Todd Bishop, however, observed that Microsoft Office applications have more capabilities than Google Docs, which are simple and very user-friendly.

Excel, in contrast to Google spreadsheets, allows advanced users to do advanced calculations in the application. This is helpful for science students and data crunchers and even more functional in light of new tablet and cloud capabilities.

Microsoft is also introducing new features to its old applications. For example, Excel has new power user features like auto-fill for lists within the Excel and changes to the Word interface.

Microsoft has not yet announced when the new version of Microsoft Office will be available or how much it will cost.

“Microsoft’s age-old answer to the age-old question is: TBD,” says Todd.

However, since Microsoft Office is so widely used, they may actually have a chance when competing with free, cloud-based Google Docs. Offering a large bundle of newly-acquired applications with their new Windows 8 operating system and improving the versatility of Office 2013 with cloud-based computing, Microsoft is taking a leap that could pay off.

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By Jillian Raftery